India reaches out to world sans WTO deal

New Delhi: Repeated but failed attempts by developing countries to reach convergence with rich nations on the stalled Doha Round of WTO forced India to work for speedy completion of Free Trade Agreements in 2007 to tap newer markets.

As India needs larger engagement with the world for sustaining the pace of its economic growth, it took lead along with Brazil and South Africa in pushing the Doha talks through a series of formal and informal meetings, but the prospects of a trade deal fair to the developing countries remained dim.

“It was a disappointing year at the WTO. Despite the desire of all countries, particularly developing countries, the Doha Development Round has not moved to convergence," Commerce and Industry Minister Kamal Nath said.

As a key WTO player, India remained engaged actively at various fora not only in WTO headquarters in Geneva and at the level of trade ministers, but also showed its flexibility and commitment as expressed by Prime Minister Manmohan Singh.

Singh conveyed the country’s desire for a give-and-take on Doha at least on a couple of occasions to US President George Bush and Brazilian President Luiz Inacio Lula da Silva during the year.

Though Nath gets along quite well with European Union Trade Commissioner Peter Mandelson and US Trade Representative Susan Schwab, he proved to be a tough negotiator “making right kind of noises" along with his Brazilian counterpart Celso Amorim when it came to opening markets and cutting duties.

The multilateral talks remained stalled, mainly on agricultural subsidy with the developing countries wanting the rich nations, particularly the US and EU, to cut their farm subsidies which distort term of trade for farm products from India, Brazil, China, South Africa.

As an alternative, India, like most other global players, resorted to working out market opening arrangements through bilateral FTAs with large trade blocs like Asean and EU.

“Multilateral agreements are here to stay and regional agreements would act as building blocks to multilateral arrangements," Nath said.

Though the Indian economy, the third largest in terms of purchasing power parity according to Finance Ministry’s mid-year review, continues to depend largely on domestic consumption, ratio of its international merchandise trade is now one-third of its trillion dollar GDP. For this ratio to further improve, the country needs to seek out more global markets, free of tariff and non-trade barriers for its home grown business. In return, India has shown its willingness to open its market in bilateral FTAs.

Interestingly, while India and EU remain on the opposite poles in striking a deal in WTO, they are willing to accommodate each other in the “ambitious and broadbased" Bilateral Trade and Investment Agreement, which they want to complete by the end of 2008.

EU, with 46 billion Euros bilateral trade, has emerged as India’s largest trading partner and the volume could grow substantially once the two sides agree to remove obstacles and slash duties further through this agreement.

While the EU is looking at a market of one billion Indian consumers, New Delhi is eyeing the 450 million strong European market for its business and exporters.

Unlike Asean which wants India to bring down duties on sensitive agricultural products like palm oil, tea, coffee and pepper, the EU has interest in market for non-agricultural products.

Though India has maintained in the Doha talks that its industrial base is still at a nascent stage, it is willing to yield market for industrial goods in bilateral pact, of course as a bargain for unrestricted access to its services in which Indians have excelled themselves.